Bounce back loans and business closure

Same Day - Initial "FREE" advice -In total Privacy online - Confidentiality Assured

Covid-19 affecting your business? Same-day Rescue & Recovery Options Available.

Free Director Advice & Support TODAY.

Our Licensed Insolvency Practitioners offer Confidential Safe Advice online.

Bounce Back Loans, Liquidation and Guarantees



STOP HMRC & Creditor Pressure

HMRC Tax Issues

Business Recovery and Rescue

Post COVID Return To Work Review

Bounce Back Loan Issues Sorted

Licensed Insolvency Practitioners

Book a Virtual Meeting - Free Confidential Advice
If you need help understanding the best way forward for your company, we can provide confidential free initial advice. You can book a free virtual meeting or call us on 0800 612 5448.

Bounce Back Loans Guarantees and Liquidation

Bounce Back Loans Guarantees and Liquidation. Understand Your Liability?

The UK Government provided 100% security to banks for loans taken out under the BBLS. Nevertheless, the company remains responsible for commencing the lone one year after receipt of the money. 

However, the first twelve months did not require repayment of capital or interest, and could be extended on request.

A unique feature of a BBL enabled borrowers not to guarantee the loan. Should the company fail, directors remain therefore not liable for repayment.

The government 100% guarantees Bounce Back Loans, not you, the borrower.

Here, the company becomes insolvent and then initiates formal insolvency proceedings, including creditors voluntary liquidation. Then liability for repaying the bounce back loan lies solely with the company, and liability cannot and will not be transferred to directors or other shareholders unless they fulfil their legal and fiduciary duties as directors. Consequently, no risk to the director’s assets or individual creditworthiness if his company cannot repay the loan.

What is a Bounce Bank Loan?

The government introduced the Bounce Back Loan Scheme (BBLS) to criticism that the Coronavirus Business Interruption Loan Scheme (CBILS) wasn’t quick enough for small businesses.

The scheme therefore allowed companies to access loans faster, allowing 25% of turnover, up to £50,000 to be borrowed. Once received, the loans remain interest-free for 12 months while underwritten by the UK government. Above all, this means that company directors do not have to be given personal guarantees to secure the funds. Bounce back loans ceased March 31st, 2021.

What can directors use a bounce-back loan for?

  • Directors must then use the loan to bring economic benefits to their business, including boosting the business’s working capital and promoting the company’s cash flow. Company Directors can use the loan to:
    • Pay salaries, though, not to add to nor pay dividends, unless sufficient profit is shown on the balance sheet.

For further reading, please view the following web pages on our website:

Bounce Back Loans Guarantees and Liquidation – An Undertaking in Difficulty

One of the critical clauses in the agreement for applying for a bounce-back loan remains for the directors to confirm their company appears not to be an undertaking in difficulty. The Insolvency Act 1986 defines this as:

  • A limited company (The Business) remains unable to pay its debts (Creditors Loans and other obligations) as and when they fall due;
  • Assets of the company;
  • The company’s assets remain less than its liabilities.

The loan document requests that company directors confirm their business remains a viable concern. Directors must not apply if they have prior knowledge of the company’s insolvency. If the latter remains the case, then:

Refer to the British Business Bank website, which details ‘The borrower remains 100% liable for repaying the loan and any interest.’

Quote from the British Bank:

The definition of ‘undertaking in difficulty’ includes businesses that: had accumulated losses greater than half of their subscribed share capital (for limited liability companies) or capital (for unlimited liability companies).

What Steps Should You Consider Avoiding Personal Liability for Bounce Back Loans?

The Bounce Back Loan Scheme. Designed to support small businesses financially affected by the Coronavirus Covid19 pandemic and struggle to repay their debts. However, some companies will still fail even with this additional funding, and company directors may be concerned about the loan’s potential implications.

Notably, a bounce back loan will not prevent you from liquidating your business as usual. Subject to the loan use, the liquidator will repay its debts from the sale of assets, and any remaining debt, written off. The insolvency practitioner appointed must examine how directors manage the business? However, as long as you have performed your director’s duties, not misused the bounce back loan, then as a director, you should have no issues.

What can you do to Avoid Personal Liability for Bounce Back Loans?

The Bounce Back Loan Scheme helped small businesses financially affected by the coronavirus COVID-19 pandemic. The scheme supported struggling businesses throughout the UK to pay their debts moving forward.

But even with this additional funding, many companies fail, causing concern for directors.

Notably, a bounce-back loan will not prevent you from liquidating your business, provided you used the BBL as per the terms and conditions you agreed to. The BBL was to pay company debts to enable the business to continue to trade to pay creditors. The insolvency practitioner will commence an investigation, but as long as you have fulfilled your director’s duties and the bounce-back loan is not misused, you should not have any issues.

Potential for Company Director Personal Liability for a Bounce Back Loan?

Directors of the company remain personally responsible for ensuring a bounceback loan repayment if their limited company liquidates.

One of two scenarios exits:

  • Use of funds not used following the loan agreement terms of use.

Company directors risk liability personally when the funds remain used, not as per the loan agreement.

Suppose you used the Bounce Back Loan for:

  • Personal debts; 
  • Purchase of holiday home, Caravan, Motorhome or other personal property;
  • Repay a director’s loan account. 

All three above have no economic benefits for the company.

Therefore, considered an act of misfeasance, exposing the directors to personal liability for repayment of the outstanding loan. 

  • Payments to company creditors ‘in preference.’

Company directors managing and operating a limited company must ensure that creditors remain protected when they have cash flow difficulties, and their position does not worsen.

Directors who have used the Bounce Bank Loan as a preferential payment to company creditors, leaving other creditors unpaid, remain at risk.

Additionally, repaying any debts owed to family or other connected creditors, knowing HMRC remain unpaid, remains also at risk and may be considered a preference.

Bounce Back Loans Guarantees and Liquidation – Comprehending Preference Payments

Directors of limited companies can also use the loan to refinance existing loans. Be careful, though, if you plan to do so. Paying off debt personally guaranteed is treating that payment as a preference. 

For example, a company owing various debts decides to use the Bounce Back Loan only to repay the debt guaranteed personally by the director, ignoring the debt they have not secured. Therefore, preference has occurred.

A director opts to repay personally guaranteed debt, i.e. the debt for which the director remains personally liable in the case of liquidation of a company. Therefore, unsecured creditors remain unpaid, considered an act of misfeasance.

My business needs funding, but I don’t want a loan.

When obtaining borrowing for your business, you should be clear about how the company will use the money. However, this will not only ensure you receive the appropriate amount of funding, but also help you select a proper type of budget. 

While loans remain advantageous in many cases, some companies may benefit from exploring alternative financing options. Companies with an account book of unpaid invoices may be better suited to discount or factoring, allowing access to a percentage of the money invoiced but not yet paid (Debtors). So this can help lower money concerns, contribute inevitability to directors, and better cash flow management. This type of funding is hugely flexible, and unlike a Bounce Back Loan, it can be turned off once the need passed, rather than the company being subject to a loan agreement for six years.

Can a Bounceback Loan Be Written Off?

Bounceback loans remain paid to a limited company, not you as an individual. Therefore, if your company enters any form of insolvency, including:

Then the loan shall be written off.

However, the use of the loan for other purposes than lent exposes directors to repay it. Any fraudulent use of the money will require the appointed Liquidator or Administrator to investigate the transaction further.

If proven, then the veil of incorporation no longer protects directors, and you then remain liable personally. Once confirmed, disqualification may be prompted to stop you from acting as a company director. The misuse may be considered THEFT!

So when worried about your situation. Ensure you therefore approach a firm that can deal with your company’s issues, ensuring the best results for the company’s creditors while protecting you as a director.

Please act quickly if your business remains no longer viable. Time does not heal with a failed company.

Can I dissolve a company with an unpaid Bounce Back Loan?

Bounce back loans have now ceased with effect Midnight March 31st,2021.

Companies now become insolvent as cash dries up without a revenue stream to support fixed operational costs. So what should directors do? Can they dissolve their company with a bounceback loan still not repaid?


HBG Advisory, open seven days a week, available to meet online in confidence to answer questions you may have about bounce-back loans. 

Can You Close a Company with a Bounce Back Loan?


Though closure must be carried out legally.

You may allow an unpaid creditor, like HMRC, to issue a winding-up order, and if approved by the courts, have your company closed by compulsory liquidation.

As for bounce back loans, they remain no different from any other debt, except personally guaranteed. This therefore means neither your home nor you remain at risk. 

So when realising your business is insolvent, you should seek immediate advice without fear of personal issues before trading on insolvent.

To consider dissolving your companies requires your company to be solvent (paying all its debts). Simply striking your company off when insolvent at the company house is illegal, and it can be reinstated at any time. An insolvent company requires liquidation by a licensed Insolvency Practitioner.

What happens if you dissolve a Limited Company with a Bounce Back Loan?

Attempting to strike off your company while insolvent or debts still owed will usually prompt an objection to the Company Strike Off Notice.

This shows Companies House noted your company’s unpaid debts. Usually, the debt relates to those owed to HMRC.

However, the lenders rejected the loan, even though HMRC guarantees the loan.

The lender, though, holds the ultimate duty to chase the loan if unpaid.

So directors wishing to strike off their company also require a statutory requirement to notify any other creditors.

Can HMRC Restore a Dissolved Limited Company?


HMRC often reinstates limited companies.

UK company law per Section 1003 (6) of the Companies Act specifies that an insolvent struck off a company may be reinstated, and the liability of every director, managing officer and member of the company remains and may be enforced as if the company had remained on the registrar at the company house. 

What’s the Right Way to Terminate a Limited Company with a Bounce Back Loan Debt?

Via a voluntary liquidation if insolvent. A licensed Insolvency Practitioners is appointed and deals with the company’s creditors, along with realising the company’s assets.

Bounce Back Loans, Liquidation and Guarantees – In summary

The Bounce Back Loan Scheme (BBLS) designed to support UK businesses struggling with debt sustained by the current COVID19 pandemic. Due to the prolonged pandemic, companies with bounce-back loans face insolvency and need liquidating. Many directors remain concerned about their future and the effects of liquidating a company.

A bounce-back loan does not prevent you from liquidating your business. The directors of the company consider the loan unsecured. The company’s directors will not be personally held liable for the loan, unless your liquidator finds you have fraudulently traded or abused the scheme.

Please read about the consequences of not repaying a bounce back loan‘ for further information.

Support Is Just A Call Away
Business recovery for distressed directors and limited companies.
Bounce back loans and business closure
Bounce back loans and business closure
Bounce back loans and business closure
Bounce back loans and business closure
Business Recovery & Rescue.
FREE Insolvency Advice
Experts in dealing with Company Debt

    Get Help Today
    1. Name: (*)
    2. Company Name:
    3. Telephone: (*)
    4. Email:
    5. Message:

    *Required Fields


    0800 612 5448

    Further Reading